An Artist-Guide to NFTs: Are Non-Fungible-Token a Scam or Legit?

Don't get me wrong; I really like the romantic idea of democratizing the Art Market and the equalization of entering an era that will finally credit artists.

But the development of Crypto Currencies and the Cult around NFTs shows, that exactly the opposite seems to be true.

Non-fungible Tokens are trending since 2021, but are they worth the hype?

This article is for every artist (or non-artist) interested in getting on the Crypto / NFT-Art train.
It reflects my personal opinion as artist but also should refer to as many qualified sources as possible to get a clear picture, what NFTs really are.

I'm not against Crypto or NFTs but that space needs regulation and that scream for regulation needs to come from the community itself, not from the outside - to build up that much needed trust that so many grifters misuse right now.

This is going to be a thorough 15-Minutes read, you can jump to the conclusion by clicking here!

There is no reason for FoMo (Fear-of-missing-out), historically viewed the technology of the Blockchain is here to stay

But it is hard to follow the topic with all the abbreviations like ATM's, DAO's, DeFi, ICO's, NFT, BCC, BCH, ETC and tons of new coming in every day. And that is desired to be that way. Those who are in the know are gonna make it, while the rest of the world should have fun staying poor.

The system is designed for a small group of people. Everyone claiming NFTs are going mainstream anytime soon, are not getting it (or are just paid to tell that).

Since Bitcoin is the most hyped currency but not affordable to most, an increasing number of alternative currencies jump on the market. Because essentially you are going to make money on the people who enter the market after you

And it is not done by entering the Crypto-Market, the system is also designed to keep you there. You can of course make money over there and transfer it to your bank account, but it is just not how that particular market works. You will miss out of gains that may come in 3-5 years from now, this means you should participate if you earn enough to say you don't care about any ETH earned on the "Chain".

It all is one big High-Tech-Pyramid-Scheme.

And here is a hint: those who gained wins from the immense Bitcoin hype are among those who build NFT-Art-Sites to benefit from the next hype, artists are just interchangeable token in that new game of Bitcoin-investors in an attempt to make it appeal to the mainstream.


Sharing is A Necessity (And Other Problems)

One thing I have observed first hand on art platforms like Makersplace or SuperRare is that doing the legwork is all on the artists. You need a reasonable following on social Media to announce a working "Art Drop". "Reasonable" means anything between 25k up to 1,2 million followers...

That was what threw me off initially in 2019.

I know that sharing is necessary when you get out there to promote your work. On conventions the promotion is on the organizer of the event, in a gallery show, it is usually the gallery-owner whose work is to reach collectors. As independent artist I can utilize facebook adds or a Marketplace to get people in my shop. But it appears that on many NFT-Platforms the popularity of some artists has being exploited to bring people into that Crypto-space.

Also what is considered "valuable" to some, is trash to others. 

My personal opinion is that artists I know for a long time, who put their heart and a lot of skills into their work...


Should earn a lot more than that:


But this shows that putting the name out there (which depends highly on luck) is still more important than great work.

Social Media works as a mask to hide the Pyramid-Scheme perfectly since sharing anything is the very nature of platforms like twitter & co. 

But that is just icing on the cake of problems evolving around these Art Platforms as a whole; A deeper issue surfaces when you want to publish an Art-Piece to the blockchain using NFT to attach the Proof of ownership – as under heavy usage that can take from a few hours to days. 

Particularly Makersplace did no changes to the website in order to make it any more convenient or centered around the users in about 2 years, really? A Platform that creates so much value? 

The delayed submission approval process of these platforms also add to the hype as they generate an artificial kind of scarcity.

On Makersplace especially it can take ages when you add tags to the piece before it is published - which results in you having to call a moderator on Discord because you can't delete or change anything on your end.

Snapshot as of March 06. 2021


To get your piece published faster, these platforms benefit from gas you can pay (which is basically a transaction fee) but if you don't have crypto in your wallet just yet, you need PayPal and it makes the whole process a lot more inconvenient as it should be. Gas-fees are currently equivalent to $50,00 up to $200,00 just to "mint" one artwork, now that is not for the starving artist as you can guess.

And many NFTs sell below the price that minting cost, just wanted to mention that.

Even Vitalik Buterin, the developer/founder of Ethereum which powers most NFT-Platforms says that "Fees are a huge problem for the usability of Ethereum" - https://www.coinstacknews.com/news/vitalik-buterin-admits-fees-are-a-huge-problem-for-ethereums-usability/


What does This Tell Me?

The same thing that happens in the regular Art Market.
It is not about the artist ( sorry Beeple ) but a bit more perverted - it is always about the person buying the art first. 

Sounds familiar if you know how much of a scam the "capitalistic" Art Market is:


At first glance the whole NFT-thing looks different even liberating because artists get a fair share of any resold item, yet it is an even better business for the person having bought the item in many regards.

So the whole economic way of the technology is looking different from the architecture it was meant to be. 

As it is now it resembles a huge monster:

A Kaiju on the Juniata

Bigger than the financial market, similar to a pyramid-system and a scam as the real Art Market on steroids. That beast leaves a trail behind on the environment worse than Godzilla on RedBull. 

This looks like everything but not democratic at all, sorry folks.


Another big problem is the Environmental Impact of Cryptocurrencies today.

I don't want to get into that matter too much, as it is now; Mining the blockchain require huge amounts of power. There is an interesting article from Everest Pipkin about that matter on his Medium, a recommended read.

From an artists point of view it might also be good to read the opinion of Joanie Lemercier about that matter. His article was a turning point for me, to research the topic and find more information about the problem. In the end I closed my Makersplace account because of what I learned.

We are at the edge of a coming change: Ethereum is about to switch from Proof-of-Work to Proof-of-Stake right now. The plan is to complete that switch until 2022, but since this is taking away money from miners, this change could disrupt the market very soon as a 51% Attack is very likely due to the publicity around Cryptocurrencies. *Update 2022 Feb.: The Proof-of-Stake will either be postponed or never happen to Ethereum. Especially the miners want to keep the status quo. New Blockchains are rather implementing PoS but they are not as popular as Ethereum and that will not change for a long time because those on ETH will keep their value up.


The Environmental Issue: Possible Solutions

There are chances the issues can be solved but that would require a different legislation; for example that all independent miners need to provide a proof that at least 60% of power used for mining comes from renewable energy via photovoltaics. 

That would be a good start to be honest!

An alternative would be companies building mining centers running on hydrogen, similar to the google data-centers that run partially with the bloom-box. The blockchain would still run in a decentralized manner but economically it would be a lot more secure and green.

The More Difficult Issue will Be About Trust

There is already a lot of Fraud going on in the Bitcoin-Scene and now in NFT: https://agoradigital.art/blog-crypto-art-fraud-on-rarible/ 

There are also many stories yet to come about mistrust - the hype is just waiting to release the worst in people. Wait until the first story appears about known artists selling different versions of the same piece which would reduce the trust of digital artists in one day and wipe away many success stories. ...This exact thing happened with MAtt Furie, the creator of Pepe the Frog: https://www.business2community.com/nft-news/pepe-the-frog-nft-lawsuit-02460597

When do people learn that greed leads to so many problems...

Or let's talk about fake profiles; how far has society come that people start to impersonate artists to gain money? Yes this happened, read about it here: https://www.theverge.com/2021/3/20/22334527/nft-scams-artists-opensea-rarible-marble-cards-fraud-art

Or simply think about the recent case of artistic violence in which a Banksy piece was burned down to go on auction as NFT. WTF!

If such stories inspire anything, I hope no one will get the idea of burning a Monet to do that, why Banksy? Why not a Damien Hirst piece or Jonathan Meese come on, can somebody do that, please? (*Sarcasm off*)

The other thing this tells me is; even more so than the actual Art Market has made me guessing; Using the term Art does not require anyone to be an artist, just burn a piece of Art can help you make a mark - and rich too! 

The most recent hype about the Bored-Ape-Yacht-Club and clones of such clubs which exist to the hundreds are just built around the idea of getting crypto-people to donate their fortune to something (because there is no food you can buy with crypto) and so groups like the BAYC and their fellow clones have emerged to collect future interests and cash-in now and maybe give something back later.

Guy Oseary

 The interesting thing I see is, especially when I look at the NFT-Market, there is rarely some really good artwork in there because grifters actually learned that just selling art they don't own give them trust-issues and so they commission some artists. Since many of the good and great artists don't see anything valuable in the Crypto-market and NFT's, it is hard to get those into that space. Those who are in there from the beginning mind their own business and do (as I do) not accept commissions. That's why so much unpolished art pollutes that space.


Value Concerns

One thing that also stands out in the alley of downsides to this is the unpredictable outcome of value of NFT's or rather ETH spent, since that is depending on the Blockchain it was mined on. 

For now ETH might be safe but with the hype, a lot of new technologies evolve around that and may outperform Ethereum in the near future. If you know how your stuff works you can lean back, if not, I'd encourage to read this article: https://fortune.com/2021/03/10/are-your-nfts-on-the-wrong-blockchain/

One big concern should be securities as many high-tiered NFT's may become illegal because shared value is a securityhttps://decrypt.co/62989/sec-hester-peirce-nfts 

And if that would not be enough; what do you do if your NFT's vanish? Vice's article sheds some light on a current case: https://www.vice.com/en/article/pkdj79/peoples-expensive-nfts-keep-vanishing-this-is-why

Games (Play-To-Earn)

I'm not too much into games but play-to-earn made the round and had a very short rise-and-fall-cycle as much as I have observed. Big brands in the gaming-Industry are either planning or changing their mind away from implementing NFTs into their game-assets due to a huge backlash from their own communities and fans: https://www.cbr.com/nft-gaming-future-uncertain/ 

Also the general gist is that now (end of March '22) the interest bubble on NFTs is about to burst: https://www.tpinsights.com/free-articles/the-public-sentiment-towards-nfts-is-turning-sour
I would not give too much on the article above, they've written the name of author Dan Olsen wrong 2 times and also mention the 2 hour documentary "The Line goes up" in one article with the sentiment that NFTs have gone mainstream - which is just bonkers if you understood the Dan Olson documentary.

Taxes

The TAX and VAT-question is also not yet cleared fully, but it is safe to say that every transaction needs to be well documented, especially if you earn a lot of money in Cryptocurrencies. It can come back at you years later but to be honest for artists taxes are already a burden, who's got the time for this extra pile of paperwork?

And one last concern is that Crypto-Currencies are a closed system. For that currency to rise it needs people who invest and stay there. The NFT-craze is working in the opposite direction because artists usually need the money and transfer a lot to their bank accounts. More artists on the Blockchain means shrinking value. I'm not too much in Ethereum to know if that is true or not, but for Bitcoin it would be the case.

Technology and every aspect of the market is there to evolve. This is all fine and good, however with so much misinformation out there, it is difficult to make the right decisions right now. As independent artist, I hate to say this, but the Crypto Market needs more and better fiscal legislation.

If by now you still want to jump on the wagon, there are some pointers to take into account when joining a project or a marketplace: 

  • Get on the wagon early on. It is already too late for most major Crypto-assets and to bet on new ones is very speculative - so be prepared to join a speculative game.
  • Don't expect too much
    The rise of crypto-influencers stems from Social-Media Influencers, focus on getting known and see where it can take you. Not the other way round.
  • Because Pareto might be at work on the NFT-Market as well, which means:
    Only 20% of Crypto Artists share 80% of the revenue, 80% of Artists have to share the rest of 20% which is nuts (pun intended)
  • Compare sites and technology
    Especially prefer off-chain transactions and green tech
  • Learn about the pitfalls of editions and proof-of-ownership
    and see if it can benefit your work at all
  • Remember, not the amount of transactions blows the CO2-footprint, but the value
    The rich people are destroying our planet not only in RL but also on the blockchain
  • Think about the fact that earning money with cryptocurrencies may be more unstable than any currency exchange on PayPal or analog currencies can experience today
In the recent weeks I got inquiries from at least 10 (existing and emerging) NFT-Art Websites and I guess many artists will have a similar experience and are not sure whether it might make sense to jump on that train - or particular site.

Important Questions to Ask

Over the last couple of weeks I have gathered a list of questions that I send out to the "Talent-Scouts", feel free to use them yourself:

  1. What Blockchain will your NFT's be mined on?
  2. What will you do to promote responsibility to the environmental impact NFT's and the Blockchain cause today?
  3. Or better said; what better technology can you offer that works directly against the negative impact?
  4. How will ... NFT-Site in question....promote artists and their work?
  5. Will it be possible to submit NFT-Artworks without paying Gas to speed the process up?
  6. Will the website change and be optimized to focus on user experience?
  7. How will you obtain security for the value customers put into the site, brand and artists work?
  8. How will you handle the necessity for collectors to find new artists through your site?
  9. How do you plan to implement the secondary market into your business?

You can use all or just some of the questions that are important to you. Most likely you will hear nothing back because these answers are uncomfortable.
Knowing that time is not an issue and that you are not going to be rich just by joining these sites may help to decline any offer that comes around.

*Update 2022*

Just recently around February 2022, I stumbled about this video from Dan Olson, which is highly recommended if you want to learn something more in-depth about Crypto and the NFT-space that surrounds it. The lecture goes nearly 2 hours but it is really worth it. It takes you from Cryptocurrencies basics to how people develop fraud around it because the blockchain itself is immune to attacks - but people using the technology are not.


Watching so many artists jumping on the train over the last 2-3 years lit a small but then still burning candle in the back of my mind, but the lesson from this video helped me to safely forget about that matter and focus on what is really important. 


Since NFTs can only be purchased and traded using cryptocurrency, they serve as a means of boosting the value of the cryptocurrencies used for purchase, he says. To put it more directly: "NFTs exist to get you to buy crypto," he says.

You can't just go the NFT-route and say Crypto is bad. If you sell your art as NFT, you say yes to Crypto and to the environmental issues that go along with it and that will most likely not change at all.

The central thesis of this documentation is that Crypto-assets and NFT's amplify grift, fraud, and a broken gig economy - not as a side effect, but right built into the technology by design.


Conclusion / TL:DR 


You jumped to this part because you don't have the time to read the full article or may read it later. 

Unfortunately even the conclusion is long because to grasp this very topic, it requires explanation.
And this also shows why NFTs are doomed to not go mainstream anytime soon.

Which is the very core of Crypto: No one can really grasp it and bring it all down to one short sentence.

There is no need for Fear-Of-Missing-Out, because the Blockchain technology is here to stay, however; if you want to benefit from Cryptocurrencies, it is already too late to make a fortune. Essentially the system requires the bigger fool to follow the early adopters which always causes an inflation of that particular currency.  This will happen to a point where there are no fools anymore to join the train because it becomes too expensive to join and then it depends on luck what happens - think of a huge Jenga-Tower.

Pareto makes it clear that there are only 20% major Crypto-currencies and 80% that share the rest of users. That paradigm will not change, though people bet on it and that is why everyday new "Coins" make a headline but they will vanish into the 80% sand.

The Tech-cult around Crypto makes it impossible to know everything, confusion and obfuscation is built-in by default to sift chaff from the wheat. Bitcoin started the hype and those who made a fortune by investing 5k bucks back then, don't know where to spend their "money" and have built a business around Crypto today to lure others in, because:

  • You are essentially only going to make money on the fools that come after you.
  • NFTs are a hype because it brings in a new group of people to Crypto
  • Artists are just interchangeable to the very nature of the Non-Fungible-Tokens
  • The platforms that offer NFTs are bugged and face lots of issues, many evolve around copyright
  • NFTs can vanish or drop in value for no apparent reason
  • The environmental impact is not going to be solved anytime soon and NFT´s play a central role
  • Many artists are shying away from the NFT-space because fraud and rip-offs take over
  • Those artists who are in, will stay in that place as long as they are getting returns
  • You can't say yes to NFT but no to Crypto, either you are Yes/Yes or No/No
  • 10% of NFT-Collectors (aka Whales) move 90% of the market, a ridiculous ratio and much worse than Pareto that applies to merchandise / passive-income markets for artists (where 20% of successful artists share 80% of revenue and the 80% not-so-successful who share 20% of the rest)

Which makes it one big Ponzi or Pyramid Scheme, you know MLM? Crypto is far worse.

And most importantly; you can't buy anything with Crypto because it is a speculative assets, the more time and gas-fees you invest to build a tribe around your work, the more you are inclined to stick with it rather than paying out from time-to-time. 
And furthermore; you are also going to lure your followers into that market because you have to! 
Payouts also suffer from huge transaction fees, hourly exchange rates and unclear tax-rules that may become a burden later. The system is designed to keep you there, once you have your foot in.

Clubs like the Bored-Ape-Yacht-Club emerged because people wanted to create a community around their assets, rather than relying on the value artists create. They had a better idea and lure people into their groups to get them supporting any ideas they might have for the future. Whether you will receive a real value in return or not, the sheer amount of those group-clones show that many collectors or supporter of the arts are disappointed by platforms like OpenSea and their plagiarism / vanishing and many more issues.

Legislation on some countries make it harder to trade Cryptocurrencies and thus NFTs, it makes sense to have an eye on that development as this could change the game radically: .../cryptocurrency-regulations-around-world/

My personal opinion:

To succeed as artist in that market you need a very big following, everything below 100k on Instagram will just "Not Gonna Make It". Even then, Marketing and hype are much more important to build a fortune than great artwork, just look at your favorite artists and then look at some leading the pack to build your own opinion about it.

It is totally possible to build your small business around NFTs and have regular payouts to pay rent from it, no doubt - but you need that following, that tribe of supporters who embrace that you offer your work "over there". Which is not a given circumstance, I met many artists whose followers said "NO" in capital letters when their favorite artists announced NFTs in their IG feed. 

Personally, for me to join the NFT-Crowd, it would need to be less energy hungry, less complex and there would need to be a certain demand. If those three criteria are met some day, I might think again, until that, I will stay out of the game as long as possible. 

Another thing you need to be aware of are taxes. In many countries there are no laws yet but paper is patient and someday that paper wants a return from you when you can least afford it. Remember; the blockchain never forgets a thing.

As the system is now, it is very black & white. We need more grey in there and everyday use or regulation that allows everyone to make use of the technology, not just a few "chosen ones".

If we would not live in a capitalistic world, the Blockchain-technology itself might have been a very promising technology but money brings out the worst in people.


Are you an Artist? How is your experience?

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Written by

Oliver aka Fantasio is a creative blogger who likes to share his insights about art, marketing and social media. Follow Fantasio on twitter or facebook

6 comments:

  1. Oh well... That makes me re-think of this NFT thing. I got hyped by this cause I've seen that people are earning a real good amount of money with their stuff. But well, i guess that's the first impression of everyone else, the fact is that it became so popular lately that is almost impossible to get in one of those sites such as supeRare, Makers place, KnownOrigin etc, unfortunately i missed the beginning of it all and I'm pretty late in this. I was so hyped that i spent about 80 USD to mint something at Rarible, but I'm starting to regret that.

    One of the factors that made me get interested is that i could try making my most "collectible" art series to have some commercial value, but after scrolling the Rarible market i could see that it is just not profile of art, there are lots of pretty random stuff being sold at high rates and honestly i wasn't ever attracted by doing thing just to earn money. Also my application to Known Origin wasn't accepted (at least so far) their latest announcement of art sellers was composed of pretty much 3D artists with a pretty similar style.

    getting an invite is almost impossible, there are tons of people asking for it in Their Discord channels.

    I feel a bit dumb to be so vulnerable of the thing of "easy money"

    ReplyDelete
  2. @Iskander -
    That is totally understandable! In the past ten days I have seen the tag #NFTart more on one day in my Instagram feed than in the past 3 years together!

    It is true that "there is no such thing as a free lunch", there are those who have been too early in the market (and left it unused) those who came at the right time and made the best use of it and those that came later on.

    I would not worry too much about that. This is most likely no rejection but a case of "submission-overload" on those Art-Pages!
    The whole thing is meant to create a feeling of artificial scarcity. Everything in the world is a copy and every person is a unique individual. The world is trying hard to tear that image apart.



    ReplyDelete
  3. Thessian3/18/2021

    [Doing a bit lazy Copy/Paste from your Profile on Deviant Art :)]

    At first I was enthusiastic about whole NFT thingy. Because I understood it wrong. And I mean totally wrong.


    I thought it's some kind of authentication system with NFT. In that form it would eliminate on-line art theft. Example:


    No NFT - You download "free" work form site 1 and then go to site 2 and sell there under your own name. No problem.


    But if NFT would work as a kind of embedded PGP set of keys for art it would eliminate art theft.


    You download again "free" work with embedded security hash from site 1 and then you go to site2 to sell it. But this time Site 2 requires you to upload matching proof of authenticity in the form of NFT. But you got none (because only original artist has it). Zonk! No easy money for you.


    In this form, as a security system, not as a cryptocurrency scam again it would be glorious. No mining of any kind. NFT as a cryptographic Tool, where only original Artist can prove authenticity of the work. NFT in current form is just another financial piramid. It'll crash sooner or later.


    Look I've mined cryptos. I've mined BTC when it was still easily possible to mine it directly on normal computers not designated ASICs. But I was always an idiot idealist, I've mined because I wanted to buy stuff with it, not to sit on that for 30 years hoping I have nice pay-off at the other end of that tunnel. Cryptos just like any other fiat currency is gigantic scam just waiting to burst. No major economy is safe form going under, just like BTC market. When somebody dumps like 5 billion of BTC into market one day, 99.9% of suckers will be left with nothing. And let's not forget that mining all cryptos uses like 25% of power generated world-wide and it goes up every day. That's just plain bonkers and unsustainable. Just as the World doesn't have enough problems...

    ReplyDelete
  4. @Thessian: Thanks for the comment and insights! Many miners also wait for the NFT they got as an extra, it is just the different mentalities at play. Some win and some loose in that very game.
    The problem imho is that artists become the interchangeable object in that particular game. NFT-Art is today, tomorrow it will be NFT Lipstick or NFT-Waifu's or an NFT-Series on Netflix. The options are endless and artists are just the pioneering face to make that technology more appealing to the mainstream.

    ReplyDelete
  5. Der Beitrag hat mich von meinen lästigen, zeitraubenden Überlegungen befreit, ob ich bei NFTs einsteigen soll oder nicht. Ich hatte so einen Berg von Bedenken und Überlegungen, die mir jetzt bestätigt wurden. Schön, dass ich meine Zeit jetzt wieder kreativ verwenden, und diesen NFT-Kram aus meinem Kopf schmeißen kann.:)

    ReplyDelete
  6. I want to leave a comment as well...
    And i want to make it as short as possible, what is extrem rare *laugh*
    You can use a knife to cut things into half, prepare a stick to hunt for fish and even shave yourself. On the other side you can kill someone with it. It´s the person itself that decide for which cause the knife should be used.In the foreground, everyone should indeed rely on common sense, as with all things that has to be discovered or can possible bring benefits (example school system in Africa from Cardano) Unfortunately, however, humanity suffers from the fact that there are too few who can muster this common sense. And some simply do not want to.

    ReplyDelete

 

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